Philippines, from IMF borrower to lender

Rappler.com
The Philippines lent over $125 million to the ailing economies in Europe through the IMF in 2011

MANILA, Philippines – The Philippines lent over $125 million to the ailing economies in Europe through the International Monetary Fund (IMF) in 2011.

This marks a dramatic reversal in the Philippines’ relationship with the multilateral lender. For almost 45 years, the Philippines was an IMF borrower.

It started in 2006, when the Bangko Sentral ng Pilipinas prepaid all outstanding debts of the government with the IMF. Then in 2010, the Philippines joined a pooled funds where countries with strong external position lend to borrowing members.

Under this mechanism, called Financial Transactions Plan (FTP), the Philippines was classified as a “creditor,” meaning its foreign exchange contributions to the fund may be used to provide financial assistance to members.

These transactions earn interest and the funds can still be technically counted as part of the Philippines’ international reserves.   
 
The BSP reported on Tuesday, February 22, that the Philippines has infused $251.1 million in the FTP.

As of end-2011, the BSP said that IMF has disbursed over half of these funds to European countries such as Ireland, Portugal and Greece in an effort to address the financial crisis impacting the European economic zone.
 
“By virtue of their participation in the FTP, emerging market economies like the Philippines have joined international cooperation efforts to mitigate the spillover effects of Europe’s sovereign debt crisis by enhancing global financial safety nets,” the BSP noted.

This feat was a product of a healthy external position for years. Despite the humps and bumps among the economies of most of the destinations of Philippine  product exports as well as the deployed overseas Filipino workers (OFW), the net transactions of and the flow of foreign funds to the country were healthy.

For example, the balance of payments was in surplus in the last 7 years. In January the dollar reserves reached a historic high of over $77 billion, thanks mostly to a resilient remittances and foreign investments.

The BSP also announced on Tuesday that it has committed to contribute $4.55 billion to the Chiang Mai Initiative Multilateralization (CMIM) facility. The P120-billion facility is meant to provide ASEAN members, including China, Japan, Korea, Hong Kong, access to quick liquidity when needed. – Rappler.com
 

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